discount rate

noun

Finance.

the rate of interest charged in discounting commercial paper.
the interest rate charged by Federal Reserve Banks on loans to their member banks, usually against government securities as collateral.
the rediscount rate.

discount rate

The rate of interest charged by the Federal Reserve System on loans it makes to the banking system.

Discover More

Notes

Because the Federal Reserve System lends money to the banking industry, one mechanism it has for regulating interest rates is to vary the discount rate — that is, to make the money that banks borrow relatively more or less expensive. It is likely to lower the discount rate during economic downturns to stimulate investment and raise it during upswings to check inflation .

Discover More

Word History and Origins

Origin of discount rate¹

First recorded in 1925–30

Discover More

Compare Meanings

How does discount rate compare to similar and commonly confused words? Explore the most common comparisons:

discount rate vs. interest rate

Browse